Cleanspark, Inc 8-K/A, filed Nov 2, 2022
Cleanspark, Inc. (CLSK)
About this 8-K/A
Cleanspark, Inc filed this 8-K/A on November 2, 2022, reporting on events of August 17, 2022.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): |
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Registrant’s Telephone Number, Including Area Code: |
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Securities registered pursuant to Section 12(b) of the Act:
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Trading |
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
This Amendment No. 1 (this “Amendment”) to the Current Report on Form 8-K of CleanSpark, Inc. (the “Company”) originally filed on August 23, 2022 (the “Original 8-K”) is being filed to include the financial statements of WAHA Technologies, Inc. (“WAHA”) and SPRE Commercial Group, Inc. (“SPRE”) and combined pro forma financial information pursuant to Items 2.01 and 9.01 of Form 8-K. The Original 8-K was filed in connection with the Company’s acquisition of certain real property located in Wilkes County, GA from SPRE and of a mix of S19 and S19 J Pro bitcoin miners from WAHA (the “Transaction”).
Item 2.01 Completion of Acquisition or Disposition of Assets.
Reference is made to the Original 8-K for a description of the Transaction, which description is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
a) Financial statements of businesses or funds acquired.
The audited combined financial statements of WAHA Technologies, Inc. and SPRE Commercial Group, Inc. as of and for the fiscal year ended December 31, 2021, together with the notes thereto and auditor’s report thereon are filed as Exhibit 99.1 and are incorporated herein by reference. The unaudited interim financial statements of WAHA Technologies, Inc. and SPRE Commercial Group, Inc. as of and for the six months ended June 30, 2022, together with the notes thereto are being filed as Exhibit 99.2 and are incorporated herein by reference. The consent of BPS & Associates, LLC, auditors of the combined financial statements of WAHA and SPRE, to the inclusion of its report with the audited combined financial statements of WAHA and SPRE is attached hereto as Exhibit 23.1 to this Current Report.
(b) Pro forma financial information.
The unaudited pro forma condensed combined financial information of the Company as of and for the nine months ended June 30, 2022 and as of and for the year ended September 30, 2021, and notes related thereto, are filed as Exhibit 99.3 and incorporated by reference herein.
(d) Exhibits.
Exhibit |
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Description |
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23.1 |
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Consent of BPS & Associates, LLC, auditors of the combined financial statements of WAHA and SPRE. |
99.1 |
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99.2 |
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99.3 |
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104 |
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Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline Instance XBRL document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CLEANSPARK, INC. |
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Date: |
November 2, 2022 |
By: |
/s/ Gary A. Vecchiarelli |
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Name: Gary A. Vecchiarelli |
Exhibit 99.3
CLEANSPARK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
CLEANSPARK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On August 17, 2022, CleanSpark, Inc. (the “Company”), through its wholly owned subsidiary, CSRE Properties Washington, LLC, a Georgia limited liability company (“CSRE”), completed the purchase of real property, together with all improvements situated thereon and all rights, easements and appurtenances belonging thereto (collectively, the “Property”), from SPRE Commercial Group, Inc. f/k/a WAHA, Inc. (“SPRE”), a Georgia corporation (the “Seller”), pursuant to a Land Purchase and Sale Agreement dated as of August 5, 2022 and amended on August 17, 2022.
Additionally, on August 17, 2022, in connection with the Land Purchase and Sale Agreement, the Company completed the purchase of a mix of S19 and S19 J Pro bitcoin miners with a total processing power equal to approximately 341,985 terahashes, pursuant to an equipment purchase and sale agreement (together with the Land Purchase and Sale Agreement, the “Acquisition”), from Waha Technologies, Inc., a Georgia corporation (“WAHA”, collectively with the Seller "WAHA & SPRE" or the "Sellers"), an affiliate of the Seller. Pursuant to the Land Purchase and Sale Agreement and the Equipment Purchase and Sale Agreement the Company acquired substantially all of WAHA & SPRE's assets.
At the closing on August 17, 2022 of the Acquisition, total consideration for the Property and miners consisted of (i) $1,961,747 in financing provided by the Seller to the Company at an interest rate of 12% per annum, to be repaid in 12 monthly installments of $173,651, (ii) the Company’s assumption of a mortgage with a maximum principal amount of $2,158,253 and an interest rate of 13% and (iii) $19,771,610 of cash consideration paid by the Company to the Seller.
The following sets forth unaudited pro forma condensed combined financial statements of the Company, prepared in accordance with Article 11 of Regulation S-X. The following information should be read in conjunction with (1) the accompanying notes to the unaudited pro forma condensed combined financial statements, (2) Management’s Discussion and Analysis of Financial Condition and Results of Operations and the historical consolidated financial statements of the Company and the accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021 and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as previously filed with the Securities and Exchange Commission, and (3) the historical financial statements of WAHA & SPRE and the accompanying notes as of and for the year ended December 31, 2021 and the six months ended June 30, 2022 included in this amended Form 8-K filing as Exhibits 99.1 and 99.2, respectively.
The unaudited pro forma condensed combined financial statements are based on and have been derived from the historical consolidated financial statements of the Company and WAHA & SPRE, adjusted to give effect to the Acquisition. The unaudited pro forma condensed combined statements of operations for the year ended September 30, 2021 and the nine months ended June 30, 2022 were prepared as if the Acquisition occurred on October 1, 2020. The unaudited pro forma condensed combined balance sheet was prepared as if the Acquisition occurred on June 30, 2022. The pro forma adjustments consist of transaction accounting adjustments that are necessary to account for the Acquisition.
The unaudited pro forma condensed combined financial statements have been prepared by management for illustrative purposes only and do not purport to represent what the results of operations, financial condition or other financial information of the Company would have been if the Acquisition had occurred as of the dates indicated or what such results or financial condition will be for any future periods. The unaudited pro forma condensed combined financial statements are based on preliminary estimates and assumptions and on the information available at the time of the preparation thereof. Any of these preliminary estimates and assumptions may change, be revised or prove to be materially different, and the estimates and assumptions may not be representative of facts existing at the time of the Acquisition. The unaudited pro forma condensed combined financial statements do not reflect non-recurring charges that will be incurred in connection with the Acquisition, nor any cost savings and synergies expected to result from the Acquisition (and associated costs to achieve such savings or synergies).
2
CLEANSPARK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2022
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CleanSpark, Inc. |
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WAHA & SPRE |
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Pro Forma Adjustments (Note 5) |
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Pro Forma Combined |
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ASSETS |
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Current assets |
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Cash and cash equivalents, including restricted cash |
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$ |
2,661,682 |
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$ |
1,048,168 |
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$ |
(3,709,850 |
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(a),(g) |
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$ |
— |
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Other current assets |
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26,786,991 |
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1,253,926 |
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(1,253,926 |
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(g) |
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26,786,991 |
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Total current assets |
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$ |
29,448,673 |
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$ |
2,302,094 |
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$ |
(4,963,776 |
) |
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$ |
26,786,991 |
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Property and equipment, net |
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$ |
322,185,923 |
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$ |
40,534,233 |
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$ |
(16,642,623 |
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(f),(g) |
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$ |
346,077,533 |
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Other long-term assets |
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59,424,228 |
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16,830,815 |
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(16,830,815 |
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(g) |
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59,424,228 |
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Total assets |
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$ |
411,058,824 |
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$ |
59,667,142 |
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$ |
(38,437,214 |
) |
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$ |
432,288,752 |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable and accrued liabilities |
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$ |
12,995,578 |
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$ |
6,330,813 |
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$ |
10,779,115 |
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(a),(g) |
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$ |
30,105,506 |
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Other current liabilities |
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6,990,716 |
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17,732,994 |
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(15,771,247 |
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(c),(g) |
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8,952,463 |
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Total current liabilities |
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$ |
19,986,294 |
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$ |
24,063,807 |
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$ |
(4,992,132 |
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$ |
39,057,969 |
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Long-term liabilities |
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14,205,735 |
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12,639,049 |
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(10,480,796 |
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(b),(g) |
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16,363,988 |
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Total liabilities |
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$ |
34,192,029 |
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$ |
36,702,856 |
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$ |
(15,472,928 |
) |
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$ |
55,421,957 |
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Stockholders' equity |
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Common stock; $0.001 par value; 100,000,000 shares authorized; 41,300,241 shares issued and outstanding as of June 30, 2022 |
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41,299 |
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18,921,981 |
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(18,921,981 |
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(g) |
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41,299 |
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Preferred stock; $0.001 par value; 10,000,000 shares authorized; Series A |
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1,750 |
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— |
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— |
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1,750 |
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Additional paid-in capital |
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530,506,510 |
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50,603 |
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(50,603 |
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(g) |
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530,506,510 |
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Accumulated other comprehensive income (loss) |
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69,996 |
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— |
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— |
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69,996 |
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Accumulated deficit |
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(153,752,760 |
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3,991,702 |
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(3,991,702 |
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(g) |
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(153,752,760 |
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Total stockholders' equity |
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376,866,795 |
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22,964,286 |
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(22,964,286 |
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376,866,795 |
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Total liabilities and stockholders' equity |
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$ |
411,058,824 |
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$ |
59,667,142 |
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$ |
(38,437,214 |
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$ |
432,288,752 |
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The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
3
CLEANSPARK, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 2022
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CleanSpark, Inc. |
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WAHA & SPRE |
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Pro Forma Adjustments (Note 5) |
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Pro Forma Combined |
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Revenues, net |
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$ |
105,351,561 |
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$ |
25,223,823 |
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$ |
— |
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$ |
130,575,384 |
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Costs and expenses |
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Cost of revenues (exclusive of depreciation and amortization shown below) |
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24,607,950 |
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10,296,530 |
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— |
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34,904,480 |
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Payroll expenses |
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24,209,787 |
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1,267,848 |
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— |
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25,477,635 |
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General and administrative expenses |
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11,654,729 |
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3,001,620 |
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— |
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14,656,349 |
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Impairment expense |
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11,452,405 |
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— |
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— |
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11,452,405 |
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Realized gain on sale of digital currency |
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(2,026,427 |
) |
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(476,465 |
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— |
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(2,502,892 |
) |
Depreciation and amortization |
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32,659,747 |
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3,930,942 |
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(1,290,692 |
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(d) |
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35,299,997 |
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Total costs and expenses |
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102,558,191 |
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18,020,475 |
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(1,290,692 |
) |
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119,287,974 |
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Income from operations |
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2,793,370 |
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7,203,348 |
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1,290,692 |
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11,287,410 |
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Other expense |
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(1,728,580 |
) |
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(2,535,507 |
) |
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— |
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(4,264,087 |
) |
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Income before income tax expense |
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1,064,790 |
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4,667,841 |
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1,290,692 |
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7,023,323 |
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Income tax expense |
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— |
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(1,180,175 |
) |
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— |
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(1,180,175 |
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Income from continuing operations |
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$ |
1,064,790 |
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$ |
3,487,666 |
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$ |
1,290,692 |
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$ |
5,843,148 |
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Net income |
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$ |
1,064,790 |
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$ |
3,487,666 |
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$ |
1,290,692 |
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$ |
5,843,148 |
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Preferred stock dividends |
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335,439 |
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— |
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— |
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335,439 |
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Income attributable to common shareholders |
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$ |
729,351 |
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$ |
3,487,666 |
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$ |
1,290,692 |
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$ |
5,507,709 |
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Income from continuing operations per common share - basic |
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$ |
0.02 |
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$ |
0.13 |
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Weighted average common shares outstanding - basic |
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41,010,826 |
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41,010,826 |
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Income from continuing operations per common share - diluted |
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$ |
0.02 |
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0.13 |
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Weighted average common shares outstanding - diluted |
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41,092,028 |
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41,092,028 |
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The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
4
CLEANSPARK, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMEBER 30, 2021
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CleanSpark, Inc. |
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CleanSpark, Inc. |
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WAHA & SPRE |
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Pro Forma Adjustments (Note 5) |
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Pro Forma Combined |
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Revenues, net |
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$ |
49,438,115 |
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|
$ |
(10,151,008 |
) |
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$ |
16,284,592 |
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$ |
— |
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$ |
55,571,699 |
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Costs and expenses |
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Cost of revenues (exclusive of depreciation and amortization shown below) |
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13,964,711 |
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(8,701,682 |
) |
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|
1,727,314 |
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— |
|
|
|
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|
6,990,343 |
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Payroll expenses |
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25,355,684 |
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(4,173,779 |
) |
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|
390,263 |
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— |
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|
21,572,168 |
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General and administrative expenses |
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13,564,619 |
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(1,310,126 |
) |
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|
2,357,602 |
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— |
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|
14,612,095 |
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Impairment expense |
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12,885,786 |
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(6,277,710 |
) |
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— |
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— |
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6,608,076 |
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Realized gain on sale of digital currency |
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(3,104,378 |
) |
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— |
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(32,189 |
) |
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— |
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(3,136,567 |
) |
Depreciation and amortization |
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12,244,368 |
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(1,216,499 |
) |
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1,786,814 |
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1,733,519 |
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(d) |
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14,548,202 |
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Total costs and expenses |
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74,910,790 |
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(21,679,796 |
) |
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|
6,229,804 |
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1,733,519 |
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61,194,317 |
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Income (loss) from operations |
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(25,472,675 |
) |
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|
11,528,788 |
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10,054,788 |
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(1,733,519 |
) |
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(5,622,618 |
) |
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Other income (expense) |
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3,660,665 |
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|
8,353 |
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(3,702,015 |
) |
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(122,066 |
) |
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(e) |
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(155,063 |
) |
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|
|
|
|
|
|
|
|
|
|
|||||
Income (loss) before income tax (expense) or benefit |
|
|
(21,812,010 |
) |
|
|
11,537,141 |
|
|
|
6,352,773 |
|
|
|
(1,855,585 |
) |
|
|
|
|
(5,777,681 |
) |
Income tax expense |
|
|
— |
|
|
|
— |
|
|
|
(1,725,972 |
) |
|
|
— |
|
|
|
|
|
(1,725,972 |
) |
Income (loss) from continuing operations |
|
$ |
(21,812,010 |
) |
|
$ |
11,537,141 |
|
|
$ |
4,626,801 |
|
|
$ |
(1,855,585 |
) |
|
|
|
$ |
(7,503,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
$ |
(21,812,010 |
) |
|
$ |
11,537,141 |
|
|
$ |
4,626,801 |
|
|
$ |
(1,855,585 |
) |
|
|
|
$ |
(7,503,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Preferred stock dividends |
|
|
177,502 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
177,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) attributable to common shareholders |
|
$ |
(21,989,512 |
) |
|
$ |
11,537,141 |
|
|
$ |
4,626,801 |
|
|
$ |
(1,855,585 |
) |
|
|
|
$ |
(7,681,155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss from continuing operations per common share - basic and diluted |
|
$ |
(0.75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.26 |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted average common shares outstanding - basic and diluted |
|
|
29,441,364 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,441,364 |
|
|||
The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.
5
CLEANSPARK, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Basis of pro forma presentation
On August 17, 2022, the Company completed the acquisition of real property and equipment from WAHA & SPRE for aggregate consideration of $23,891,610. The acquisition was determined to be an acquisition of a business and was accounted for as a business combination under Accounting Standards Codification 805, Business Combinations (“ASC 805”).
The unaudited pro forma condensed combined financial statements present the combination of the historical consolidated financial statements of the Company and WAHA & SPRE, adjusted to give effect to the Acquisition and related transactions. The historical June 30, 2022 balance sheets of the Company and WAHA & SPRE were used to create the unaudited pro forma condensed combined balance sheet as of June 30, 2022 – the last day of the Company’s third fiscal quarter.
The Company and WAHA & SPRE have different fiscal year ends with the Company following a fiscal year ending on September 30 and WAHA & SPRE following a calendar year-end ending on December 31. Accordingly, the unaudited pro forma condensed combined statement of operations for the year ended September 30, 2021 has been prepared by combining the Company’s audited historical consolidated statement of operations and comprehensive loss for the year ended September 30, 2021, with the audited historical combined statement of income of WAHA & SPRE for the twelve months ended December 31, 2021. As of June 30, 2022, the Company deemed its energy operation to be discontinued operations due to its strategic shift to strictly focus on its bitcoin mining operations and divest of its energy assets, therefore a column was added to remove the effects of discontinued operations.
The unaudited pro forma condensed combined statement of operations for the nine months ended June 30, 2022, has been prepared by combining the Company’s unaudited historical consolidated statement of operations for the nine months ended June 30, 2022, with the unaudited combined statement of income of WAHA & SPRE for the nine months ended June 30, 2022. Solely for purposes of these pro forma condensed combined statement of operations for the nine months ended June 30, 2022, in order that each of the Company and WAHA & SPRE would have periods of the same length to combine, the WAHA & SPRE income and expenses for the nine months ended June 30, 2022 were calculated by (1) taking the operating results set forth in historical unaudited combined statement of income of WAHA & SPRE for the six months ended June 30, 2022 and multiplying them by fifty percent to obtain an estimated additional three months of operating results, and then (2) adding such calculated amount to the historical six month operating results to obtain the WAHA & SPRE combined statement of income for the nine months ended June 30, 2022.
Note 2. Purchase price
The Acquisition has been accounted for using the acquisition method of accounting in accordance with ASC 805. The following is a summary of the components of the purchase price paid by the Company to the Sellers in the Acquisition:
Cash consideration |
|
$ |
19,771,610 |
|
Financing provided by Seller |
|
|
1,961,747 |
|
Mortgage assumption (principal amount) |
|
|
2,158,253 |
|
Total preliminary purchase price |
|
$ |
23,891,610 |
|
Note 3. Purchase price allocation
ASC 805 requires that, among other things, the assets acquired, and liabilities assumed be recognized at their fair values, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill.
The following is a summary of the preliminary allocation of the purchase price as of August 17, 2022 (the closing date of the Acquisition), based on preliminary estimates of the fair values of the assets acquired:
6
|
|
Useful life (years) |
|
Amount Assigned |
|
|
Land |
|
N/A |
|
$ |
100,000 |
|
Building/Improvements |
|
30 |
|
|
14,700,000 |
|
Miners |
|
3 |
|
|
9,091,610 |
|
Total property and equipment |
|
|
|
$ |
23,891,610 |
|
The preliminary purchase price allocation has been used to prepare the transaction accounting adjustments in the pro forma balance sheet and statements of operations. The final allocation of the actual purchase price is subject to the final valuation of the acquired assets, but that allocation is not expected to differ materially from the preliminary allocation presented in these unaudited pro forma condensed combined financial statements. The final allocation may include (1) changes in fair value of property and equipment; and (2) changes in allocations to assets. The final allocation is expected to be completed when the Company files its Annual Report on Form 10-K for the year ended September 30, 2022.
Note 4. Reclassifications to unaudited pro forma condensed combined financial statements
The unaudited pro forma condensed combined financial statements have been adjusted to reflect reclassifications of WAHA & SPRE's financial statement presentation to conform to the Company's condensed financial statement presentation, which is summarized below.
Pro forma condensed combined balance sheet as of June 30, 2022:
Pro forma condensed combined statements of operations for the nine months ended June 30, 2022, and for the year ended September 30, 2021:
Note 5. Pro forma adjustments
The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are based on preliminary estimates and assumptions that are subject to change and are as follows:
7
(a) |
|
Reflects the cash consideration to be paid (net of cash paid) related to the Acquisition (see Note 2). |
(b) |
|
Reflects the mortgage assumed by the Company as part of the Acquisition (see Note 2). |
(c) |
|
Reflects the principal amount of the Seller based financing provided to the Company for the purchase of the Acquisition (see Note 2). |
(d) |
|
Reflects the adjustment to depreciation and amortization expense of property, plant and equipment acquired by the Company resulting from the effect of the preliminary purchase price allocation. |
(e) |
|
Reflects interest expense for the Seller based financing provided to the Company for the purchase of the Acquisition. The principal amount is $1,961,747 with an interest rate of 12% and a term of 12 months. |
(f) |
|
Reflects the preliminary allocation of the purchase price to the acquired tangible assets based on their estimated fair values (see Note 3). |
(g) |
|
Reflects the assets, liabilities, and equity that were not assumed as part of the Acquisition. |
8